Governments need CBDCs to improve financial inclusion among citizens

Financial exclusion remains a significant global challenge, with over 1.3 billion adults worldwide lacking access to a financial account, creating a 'cash-digital divide' that isolates them from the formal economy. Central Bank Digital Currencies (CBDCs) are being promoted as a crucial solution to bridge this gap, offering a trusted, risk-free alternative to physical cash that can facilitate mass adoption and foster universal financial inclusion.

The Role of Financial Inclusion in Economic Growth

Expanding access to financial institutions is vital for stimulating national economic growth. Increased participation in the formal economy broadens the total capital base, leading to greater financial stability. Furthermore, bringing individuals into the formal economy ensures that policy rate changes effectively reach the population, enhancing regulatory oversight and fraud prevention.

Challenges with Cash-Based Systems

Many low-income individuals rely on cash due to its ease of use, universal acceptance, lack of transaction charges, and trusted nature. However, the infrastructure required for cash management is resource-intensive, often deterring service providers and creating a significant gap between the unbanked and the formal economy. Cash transactions also lack a digital record, leading financial institutions to classify the unbanked as high-risk and deny them access to essential services like insurance and credit.

CBDCs as a Catalyst for Inclusion

A significant portion of emerging and low-income countries view financial inclusion as a primary motivation for issuing CBDCs, according to a 2023 study referenced by the IMF. CBDCs can accelerate financial inclusion through a two-tier distribution model, enabling both commercial banks and non-banking entities to reach the excluded demographic and reduce high overhead costs. The design of CBDCs is also incorporating offline transaction support to cater to populations with limited internet or mobile connectivity, utilizing short-range communication technologies for resilient payments in remote areas.

As public-sector digital infrastructure, CBDCs prioritize public welfare over commercial profit, offering an optimized cost structure with de minimis transaction costs. This makes them accessible and economically resilient. The underbanked are more likely to trust CBDCs due to their backing by a credible institution, serving as a direct liability of the central bank, unlike private financial entities.

CBDCs provide a crucial portal for the financially excluded to engage with the formal economy by enabling the smooth exchange of transaction data. They can support privacy-preserving data sharing, allowing users to voluntarily share transaction history to build credit scores for accessing savings, credit, and insurance. This transaction data can serve as a legitimate source for lenders to evaluate financial behavior and creditworthiness in the absence of formal credit history.

Progress Towards CBDC Adoption

While CBDC usage depends on digital literacy, electricity infrastructure, and hardware access, significant progress has been made globally. The World Bank Group's 2025 Global Findex Database reports that 86% of adults own a mobile phone, and 79% have a bank account, with 61% making digital payments in low and middle-income economies. Despite this progress, 1.3 billion people still lack financial accounts, even with necessary prerequisites like phones and SIM cards.

In this context, CBDCs are presented as a primary product capable of offering safe, affordable, and convenient financial services. Central banks and governments are urged to adopt a holistic approach, leveraging CBDCs to integrate the financially inexperienced demographic into the formal economy.